The Private Health Insurance Choices of Medicare Beneficiaries

Abstract

This article presents, critiques, and analyzes the influence of prices on insurance choices made by Medicare beneficiaries in the Medicare Advantage, Part D, and Medigap markets. We define price as health insurance premiums for the Medicare Advantage and Medigap markets, and total out-of-pocket costs (including premiums and cost sharing) for the Part D market. In Medicare Advantage and Part D, prices only partly explain insurance choices. Enrollment decisions also may be influenced by other factors such as the perceived quality of the higher-premium plans, better provider networks, lower cost-sharing for services, more generous benefits, and a preference for certain brand-name products. In contrast, the one study available on the Medigap market concludes that price appears to be associated with plan selection. This may be because Medigap benefits are fully standardized, making it easier for beneficiaries to compare alternative policies. The article concludes by discussing policy options available to Medicare.